Taiwan No. 4 in sovereign wealth generation in 2007

STAFF WRITER, WITH CNA

Taiwan was rated the world’s fourth-largest sovereign wealth generator last year, with approximately US$184 billion, a recent report by international economic and financial information company Global Insight said.

The Sovereign Wealth Fund Tracker report said that Taiwan’s sovereign wealth, calculated by deducting three months of import spending from a country’s foreign exchange reserves, has been expanding at a rate of 4 percent per year on average, up from US$156 billion in 2003.

BIGGEST PLAYER

China remained the largest player, with the country’s sovereign wealth having grown by 47 percent annually from US$259 billion in 2003 to US$1.2 trillion last year.

Rounding out the top 10 list were Russia, Kuwait, Taiwan, Brazil, India, South Korea, Algeria, Liberia and Nigeria, in that order.

The report said oil exporters have been the fastest-growing sovereign wealth generators over the last five years, with Nigeria’s sovereign wealth having increased by 291 percent.

Sovereign wealth has grown in Oman by 256 percent, in Kazakhstan by 162 percent, in Angola by 84 percent, in Russia by 74 percent and in Brazil by 65 percent.

This newfound wealth has sparked the growth of sovereign wealth funds — government-controlled funds that invest in stocks, bonds and commodities around the world — that many critics believe are not transparent enough and are used by governments to project their influence rather than to maximize value for their citizens.

The report said that sovereign wealth funds worldwide have been increasing by 24 percent annually for the past three years to reach US$3.5 trillion last year.

US$80 BILLION

The report said sovereign wealth funds injected up to US$80 billion into bank shares or bank equity stakes in the US last year alone and are expected to provide even more capital this year and next.

Jan Randolph, head of sovereign risk at Global Insight, said sovereign wealth funds are replacing the combined financial muscle of hedge funds and private equity as the new financial power brokers.

“Riding the energy and commodities boom, together with the wilting dollar, sovereign wealth funds will continue to be the key players in the changing financial landscape of the global economy thrown into flux by the credit crunch,” Randolph said.